While the financial press feasts off news of big dollar commercial real estate (CRE) sales, the vast majority of brokers make their way each month with sales of $25 million and below. The LightBox team has conducted a detailed analysis of sales trends and market activity, with a particular focus for this article on the multifamily sector, where we offer a closer look at how this vital segment is contributing to the broader CRE rebound.
Current State of the Overall Market
Those that follow the LightBox CRE Activity Index know that the CRE market is slowly but surely rebounding after the malaise that spanned two years starting in the spring of 2022.
The Index aggregates data on new sales listings, appraisals procured, and environmental Phase I ESA (environmental site assessment) reports ordered to get a current state of CRE activity each month. The benchmark has shown CRE activity ticking up consistently throughout 2024, to the relief of sales brokers and loan originators.
Sales Activity Among Smaller Properties
The surge in interest rates starting in 2022 took a big bite out of property values, leading to a sharp uptick in CRE distress and a huge fall off in property sales. This made for a particularly difficult time for CRE brokers as the industry suffered its most challenging stretch in 15 years.
Fortunately, the 2024 rebound in activity has extended across most property types. While the hotel sales market has lagged, even the beleaguered office market has seen sales activity spike in 2024 (albeit at deeply discounted prices).
Sales have been spread widely across the size spectrum, from about 53 nine-figure sales last month to hundreds of sales below $25 million. In addition, there has been solid geographic distribution.
The Surge in Multifamily Listings Under $25 Million
A review of the multifamily segment using RCM data and LightBox sales transaction data provides some deeper insights into apartment activity.
- Between April 2024 and September 2024— a six-month stretch—the number of listings of multifamily properties with price tags of $25 million or less more than doubled on the RCM platform compared with the prior six-month period (October 2023 to March 2024).
- Regardless of price tag, the number of apartment listings on RCM has surged over the last six months. Over the most recent six-month period (April 2024 through October 2024, apartment listings increased 210% over the prior 6-month period of October 2023 to March 2024.
- Even though bigger deals get the most attention, investors have been consistently circling smaller deals as well. For deals with prices above $25 million, a single listing will average about 200 unique buyers filling out confidentiality agreements and reviewing materials in the RCM virtual deal rooms. But for deals with price tags of $25 million or less about 115 would-be buyers fill out confidential agreements, on average, according to the latest RCM data.
The CRE downturn that began in the spring of 2022 has been challenging for brokers, property owners, and loan originators. But savvy brokers have realized that by casting a wide net, the odds of landing a buyer in a weak market were substantially increased by using RCM.
“In today’s stalled market, we are discovering innovative avenues to navigate challenges. We marketed a 400,000-square-foot, single-story back-office portfolio, which is a challenge to move in today’s market, and broke it up into smaller parts that attracted 1,031 buyers. Not only did we exceed our BOV projections, but this highlighted the reality that the collective value of each part, in many cases, far exceeds the original whole.”
– Chris Toci, Executive Vice President, Capital Markets, Cushman & Wakefield
Some smaller apartment sales that jumped out at us over the last few months:
- In Madison, WI, Weidner Apartment Homes paid $18.2 million for the 88-unit 515 @ Royster Apartments property. The seller in that deal— which was listed on RCM— was represented by Gretchen Richards, Patrick Gallagher, Matson Holbrook and Ted Nevermann of CBRE.
- More recently, Paredim Communities acquired The Westporter—a 28-unit apartment property in Westport, CT—for $15.3 million. The buyer and seller in that deal were repped by Eric Pentore, Victor Nolletti, Westley Klockner and Ross Friedel of Marcus & Millichap.
- In San Mateo, CA, the Spieker Companies paid $20.8 million for the 96-unit Oakview Apartments.
Some Final Words
One narrative in 2024 has been that the CRE market has been on fumes. The steady rise in sales over the last six months tells a different story. In addition, the buying pool for apartment assets has been deep and growing, and savvy brokers need to use every device available to them to insure the best possible execution for their clients.
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